Anthropic, Google and xAI win $200M each from Pentagon AI chief for ‘agentic AI’

WASHINGTON — The military’s central artificial intelligence hub has quadrupled down on its investment in commercial “frontier AI.”

This morning, the Pentagon’s Chief Digital & AI Office (CDAO) announced that it would split $600 million in contracts evenly among Anthropic, Google, and xAI, following on a similar $200 million award to OpenAI announced last month.

If CDAO exercises all its options on all four contracts — which isn’t guaranteed — that’s a total of $800 million the Pentagon is pouring not into bespoke military R&D from dedicated defense contractors, but into widely available, widely applicable commercial tech.

The embrace of “commercial off-the-shelf” has been especially notable in AI. After OpenAI kicked off the current generative AI explosion with its launch of ChatGPT in November 2022, the Pentagon, much like the private sector, scrambled to understand the new technology, launching the high-level Task Force Lima that conducted almost 18 months of studies before blessing GenAI as an ongoing area investment. Since then, CDAO has partnered with the Army’s Enterprise LLM Workspace to bring a toolkit combining multiple commercially available GenAI models to a wide array of Defense Department offices.

Now, however, CDAO wants to go beyond GenAI to what many in the business consider the next frontier, so-called “agentic” AI. “The awards to Anthropic, Google, OpenAI, and xAI — each with a $200M ceiling — will enable the Department to leverage the technology and talent of U.S. frontier AI companies to develop agentic AI workflows across a variety of mission areas,” CDAO’s press release states.

Where the breakthrough of generative AI was that it allowed computers to generate novel content — never-before-seen text, images, or even videos — agentic AI would allow computers not only to generate plans but to take some kind of action on them. You might ask GenAI to devise an itinerary for your vacation and identify the best hotels and restaurants in the area; an agentic AI, however, would actually be able to book the reservations with your credit card. The military has already experimented with using AI agents to do staff work that would previously have required a human, while severely restricting — albeit not completely prohibiting — any project that would give software the ability to use lethal force without human authorization.

The CDAO announcement leaves open what the “variety of mission areas” might include. The office has been explicit in the past that it aims to apply AI to both the Pentagon’s back-office business processes, which run a lot like any corporation’s, and to its uniquely military functions.

Admittedly, even the full $800 million is a fraction of the funding the big AI companies are getting from civilian sources: OpenAI alone reported $10 billion in annualized revenue last month and raised a record-breaking $40 billion from investors in March. It’s also a fraction of the Pentagon’s roughly trillion-dollar annual budget.

Nevertheless, this is both a significant investment in itself and a sign of larger trends. Reformers in Congress have long pushed the Pentagon to look beyond the traditional defense industrial base and seek better, cheaper options from commercial industry, especially for IT. Obama’s last Secretary of Defense, Ash Carter, created the Defense Innovation Unit as the military’s embassy in Silicon Valley. And Trump’s new Pentagon chief, Pete Hegseth, has issued sweeping directives to expand purchases of commercial tech from software to drones.